The Superior Court lawsuit was filed Wednesday by a niece of Kathryn Johnston, accusing the city of racketeering, civil rights violations, assault, false imprisonment and negligence.
The suit targets the city, Police Chief Richard Pennington and five current and former police officers. The family is seeking unspecified damages.
Hezekiah Sistrunk Jr., an attorney for the niece, Sarah Dozier, said they had attempted to talk to the city about a settlement.
"That has been unsuccessful. That is why we are here today," he said at a news conference.
Plainclothes narcotics officers burst into Johnston's home Nov. 21, 2006, using a no-knock warrant. Johnston was killed during the raid in a hail of nearly 40 police gunshots.
Prosecutors said the officers obtained the warrant by falsely telling a judge that an informant confirmed drug dealing at the home. The informant later told federal investigators he was told by police to concoct the tale.
Prosecutors also said that one of the police officers planted three bags of marijuana in Johnston's home as part of a cover-up after no drugs were found.
"I am thankful my aunt's innocence has been proven," Dozier said in a statement read to reporters. "I am also deeply saddened that the city of Atlanta has refused to admit responsibility for unconstitutional practices."
Dozier was not present at the news conference.